ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion of our financial condition and results of operations should be read in conjunction with the audited financial statements and the notes to those statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this report that could cause actual results to differ materially from those anticipated in these forward-looking statements.
Results of Operations and Financial Condition for the Year Ended December 31, 2025 as Compared to the Year Ended December 31, 2024
Sales and Cost of Sales
The Company generated revenue of $2,183 for the year ended December 31, 2025, compared to no revenue for the year ended December 31, 2024. Cost of sales was $0 for both the years ended December 31, 2025 and 2024.
Expenses from Operations
Operating expenses for the years ended December 31, 2025 and 2024 consisted solely of general and administrative expenses. General and administrative expenses primarily include consulting fees, board compensation, and legal and professional services. General and administrative expenses increased by $212,039, or 13%, to $1,846,856 for the year ended December 31, 2025, compared to $1,634,817 for the year ended December 31, 2024. The increase was primarily driven by higher consulting fees of $176,324, increased legal and professional fees of $38,072, and higher advertising and marketing expenses of $52,638, partially offset by a decrease in board compensation of $90,000.
Other Expense
Other expenses for the years ended December 31, 2025 and 2024 consisted of interest expense and loss on extinguishment of liabilities.
Interest expense increased by $13,444, or 6%, to $226,902 for the year ended December 31, 2025, compared to $213,458 for the year ended December 31, 2024. The increase was primarily due to an additional $78,418 interest expense incurred during the year, partially offset by the absence of $65,070 of non-cash interest expense recognized in the prior year.
Loss on extinguishment of liabilities was $144,176 for the year ended December 31, 2025, compared to $0 for the year ended December 31, 2024. The increase was primarily attributable to losses recognized on the conversion of liabilities during the current year, whereas no such transactions occurred in the prior year.
Net Loss
For the years ended December 31, 2025 and 2024 we had a net loss of $2,215,751 and $1,848,275, respectively.
Liquidity and Capital Resources
Liquidity refers to the Company’s ability to generate sufficient cash to meet its operating and financing obligations. As of December 31, 2025, the Company had cash and cash equivalents of $255,940, compared to $185,097 as of December 31, 2024, representing an increase of $70,843. The change in cash was primarily attributable to cash used
in operating activities, partially offset by financing activities during the year. As of December 31, 2025, the Company had approximately $1.1 million of undiscounted obligations related to indebtedness due within one year. The Company expects to meet its short-term liquidity needs through a combination of existing cash on hand and potential additional financing, although there can be no assurance that such financing will be available on acceptable terms, or at all.
As of December 31, 2025, the Company had a working capital deficiency of $4,564,798, compared to a working capital deficiency of $4,666,666 as of December 31, 2024. At December 31, 2025, current assets totaled $270,107, consisting solely of cash. Current liabilities were $44,834,905 and consisted primarily of accrued interest, convertible notes payable, and shares to be issued. The Company had an accumulated deficit of $13,025,007 as of December 31, 2025, compared to $10,809,256 as of December 31, 2024, reflecting continued operating losses and financing-related activities during the year.
Cash Flows
Years Ended December 31,
Net cash used in operating activities
Net cash provided by investing activities
Net cash provided in financing activities
Net increase (decrease) in cash
Net cash used in operating activities was $458,240 for the year ended December 31, 2025, compared to $259,037 for the year ended December 31, 2024. For the year ended December 31, 2025, cash used in operating activities was primarily driven by a net loss of $2,215,751, partially offset by non-cash charges, including amortization expense of $667,332, amortization of debt discounts of $16,973, and a loss of $144,176 recognized on the issuance of common stock to settle liabilities. Additionally, changes in operating assets and liabilities provided $929,030 in activity.
For the year ended December 31, 2024, cash used in operating activities was primarily driven by a net loss of $1,848,275, partially offset by non-cash charges, including amortization of debt discounts of $9,349, amortization expense of $667,883, and a loss of $79,591 recognized on the issuance of common stock to settle liabilities. Additionally, changes in working capital provided $831,917 of cash, primarily driven by increases in related party accrued expenses and accounts payable and accrued expenses.
Investing activities used net cash of $0 for the year ended December 31, 2025 and 2024.
Net cash provided by financing activities was $529,083 and $165,000 for the years ended December 31, 2025 and 2024, respectively. For the year ended December 31, 2025, financing activities consisted primarily of $300,000 in proceeds from convertible notes payable and $279,083 in proceeds from the issuance of common stock, partially offset by $50,000 in repayments of convertible notes.
We did not pay any cash for interest or for income taxes during the year ended December 31, 2025 and 2024.
Going Concern
Our consolidated financial statements have been prepared assuming we will continue as a going concern. Our ability to continue our operations as a going concern is dependent on management’s plans, which includes successfully integrating Aibotics, Inc., which was acquired subsequent to December 31, 2025. The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.
For the year ended December 31, 2025, the Company incurred a net loss of $2,215,751, had negative cash flows from operations of $458,240 and may incur additional future losses. At December 31, 2025, the Company had total current
assets of $270,107 and total current liabilities of $4,834,905, resulting in a working capital deficit of $4,564,798. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after that date that the consolidated financial statements are issued.
The Company’s existence is dependent upon our ability to develop profitable operations. We are devoting substantially all of our efforts to developing the Company’s business and raising capital and there can be no assurance that our efforts will be successful. No assurance can be given that our actions will result in profitable operations or the resolution of its liquidity problems. The accompanying consolidated financial statements do not include any adjustments that might result should the company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
As of December 31, 2025, we had no significant off-balance sheet arrangements.
Critical Accounting Policies
We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles in the United States, with no need for management’s judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the notes to our December 31, 2025, financial statements. Note that our preparation of the financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. We cannot assure that actual results will not differ from those estimates.
Intangible assets, net
The Company’s intangible assets include finite lived assets. Finite lived intangible assets, consisting of intellectual property are amortized on a straight-line basis over the estimated useful lives of the assets.
Finite lived intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. An impairment loss is recognized if the sum of the expected long-term undiscounted cash flows the asset is expected to generate is less than its carrying amount. Actual future cash flows may differ from the estimates used in the impairment testing.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. These estimates and assumptions are reviewed on an on-going basis and updated as appropriate. Actual results could differ from those estimates. The Company’s estimates include the useful lives of property plant and equipment.
The depreciation of equipment is dependent upon estimates of useful lives and residual values, both of which are determined through the exercise of judgement. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic/market conditions and the useful lives of assets.
Stock Based Compensation
We follow ASC Topic 718, Compensation–Stock Compensation, which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expense in the financial statements based on their fair values on the grant date. That expense is recognized over the
period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
Recently Issued Accounting Pronouncements
Refer to Note 3 of Notes to Consolidated Financial Statements for a discussion of recent accounting standards and pronouncements.
